Webjet takes off following revelations bookings have surpassed pre-covid levels

It’s been a long time coming, but Webjet’s covid recovery is now complete, with the travel agent’s total bookings over the six months to September 30 equating to 101% of pre-pandemic levels.

On virtually every meaningful metric, Webjet’s first quarter FY23 has beaten Ord Minnett’s numbers which were well above consensus.

Revelations that Webjet expects to "exceed pre-pandemic profitability" this financial year, after a strong first-half performance, saw the share price jump 9% at the open.

However, no interim FY23 dividend was declared.

Spectacular turnaround

On the outlook, Webjet expects second-half earnings (EBITDA) to exceed pre-pandemic levels by at least $10m.

After recording a loss of -$15.9m in the first half of FY22, managing director John Guscic described todays reported $88.4m in underlying earnings (EBITDA) as “a spectacular turnaround".

Guscic also used today’s result to remind investors that before the pandemic, Webjet was one of the most profitable online travel agents globally.

“EBITDA margins are already back over 41 per cent, despite inflationary wage pressures and after absorbing the loss of overrides and commission usually earned on international travel,” Guscic noted.

WebBeds is leading the charge

While Webjet OTA significantly increased in profitability during the period, and the GoSee rebrand is progressing well, Guscic notes, all WebBeds regions saw significant organic growth.

That growth was most evident in Europe which benefited from a strong northern hemisphere summer, and North America which is now more than three times larger than it was when the pandemic began.

“Recovery is substantially accelerating and WebBeds is leading the charge."

Guscic notes WebBeds has gone from being European summer centric to a truly global business, picking up share in all regions, operating a single technology platform and with the capability to scale rapidly.

Third quarter FY23 bookings and TTV are currently tracking more than 30% ahead of pre-pandemic levels and management expects FY23 earnings (EBITDA) to be higher than it was pre-pandemic.

Today’s highlights

• $228.4m of total borrowings, versus cash on hand of $504m.

• First-half underlying earnings (EBITDA) $72.5m ($77.5m on constant currency basis) to the end of September.

• Statutory net profit was $4m, compared to a $60m loss in the previous period.

Looking forward

The new GoSee brand is being rolled out in key markets and the rebrand strategy continues to go to plan.

Second half FY23 profitability for the B2C businesses (Webjet OTA and GoSee) are expected to be consistent with first half FY23 results, reflecting the macroeconomic environment.

“It is exciting to see the company emerge from the pandemic more agile, more efficient and better placed to deliver growth than ever before,” Guscic noted.

While Webjet OTA has increased its market share by 57% since the pandemic began, Guscic expects restoration of airline capacity to be the driver of pre-pandemic profitability for this operation.

What brokers think

Webjet’s share price is down -8% over one year but has been on a tear since plunging to a low of $4.62 early October.

Consensus on Webjet is Moderate Buy.

Following today’s result, Ord Minnett has placed its $7.34 valuation under review.

Webjet's share price over three months.